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January 05, 2009

Stein and Browne Popularize the Un-Merger

Larry Stein, back when being affiliated with Dreier meant something ... else.

One big California question in the wake of the Marc Dreier scandal is on its way to being answered: How will L.A. affiliate Dreier Stein Kahan Browne Woods George deal?

Call it an un-merger. To get rid of the Marc Dreier aftertaste, the two firms that in the last two years had each joined forces with Dreier to create the Los Angeles affiliate are dropping Dreier (obviously) and splitting in two. The entertainment and corporate piece headed by Larry Stein and Robert Kahan is looking to join another big firm, while the business litigation piece formerly known as Browne Woods & George has just gone back to being a boutique.

It doesn’t take much anymore to make Allan Browne’s ‘best’ list, after the jump …

Allan Browne deemed today one of the best days he’s had in a long while.

When the Southern California litigator walked into his office, the sign over the receptionist read “Browne Woods George” — almost exactly what it looked like before his litigation shop got wooed aboard the Dreier train a year ago.

“We’re thrilled to be back in our comfortable shoes again, controlling our own destiny again, with nobody named Marc Dreier” on the name plate, Browne told Legal Pad today.

His 20-lawyer civil litigation boutique made the leap in January 2008 to join the L.A. outpost then called Dreier Stein & Kahan. The lawyers at the resulting Dreier Stein Kahan Browne Woods George have all spent the past month distancing themselves from the fallen New York lawyer, and BWG just managed to peel off Jan. 1. It will continue practicing as an independent boutique out of Century City, Browne said.

BWG has been wooed by national firms, but its name partners say they have no interest right now to play that kind of ball again, even with Stein and Kahan, who are looking for a new home at a bigger full-service firm. (More on that matchmaking below.) Browne said that when you take the Dreier out, the two groups have diverging interests that are taking them in different directions. One of the reasons Browne said his boutique has gotten a lot of business is that it is not a full-service shop that could be perceived as a competitive threat.

Still, boosting the boutique’s national prominence and ability to handle bigger cases was one of the reasons Browne Woods had joined the Dreier operations in the first place, Browne said, adding that there were no warning flags before they signed up. Dreier not only seemed like a “kind, generous and warm-hearted” guy, Browne said, and he also readily agreed with BWG partners’ requests, including a provision in the employment agreement to allow any disputes between the parties to be arbitrated by JAMS in Los Angeles. “He wasn’t trying to get us involved in a situation that we’d have to litigate in New York if things didn’t work out,” Browne said. It helped, he added, that “they made some wonderful promises and the pay was great.”

At least BWG has come out of this with an East Coast office, which will be staffed with three or four former Dreier firm lawyers, Browne said. The office will continue to handle truth-in-lending class actions stemming from the subprime mortgage mess.

Relief was also palpable from name partner Eric George this afternoon. He said that a month ago, he was worried about whether his group would be able to spend the revenue coming in to cover payroll and bonuses, given that Dreier was the sole shareholder of the firm. It turned out all right: the receiver, the U.S. attorney and the bank gave his group a “clean bill of health” and all was paid out, George said. He’s also happy that the group came out intact. “You really see what people are made of when they’re in the crucible,” he said. “It was an attrition rate of zero and incredible support and loyalty of every single person in this office.” Watching from the sidelines, George said that Kahan and Stein are having “more of a beauty pageant than I could’ve imagined, which is a great testament to their practice.”

People familiar with those talks said that the entertainment and corporate group was talking to Boston-based Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, New York firm Kramer Levin Naftalis & Frankel and L.A.-based Liner Yankelevitz Sunshine & Regenstreif. Another source close to the talks said that Troutman Sanders and Buchanan Ingersoll & Rooney were also in play.

George said his firm plans to continue to work on existing and future cases with the partners no matter where they land.

As for Stein and Kahan, the two partners say they’d like to be tucked into a new home by February.

Corporate attorney Kahan said that his transactional practice has grown to the point where a bigger, more national full-service firm with expertise in M&A, tax and representation of public companies and private equity funds would be the way to go. “Everybody we’re talking to has that kind of platform,” he said.

Stein said no headhunter is involved, and that at least a dozen national and local firms have contacted the group. “It is an embarrassment of riches the number of firms that are interested,” he said. Clients and referral sources have expressed support, he said, telling him “wherever you go, we go.”

Stein, a well-known entertainment lawyer, said that he’s sifting through offers and trying to determine what the best alternative is for the greatest number of people. He said he hoped the core group -- about 30 or 35 partners and associates Stein and Kahan brought aboard when they tied up with Dreier in early 2007 -- will move together by Feb 1.